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We advise listed and private companies on how they can pay and incentivise their employees, management and senior team in tax efficient ways. We also advise employees and executives who are being offered participation in incentive arrangements.

With a combination of tax and legal knowledge, supported by practical experience gained across a range of sectors, we provide cost-effective solutions that help businesses to recruit, retain and motivate talent.

The success of any business is dependent upon the ability to recruit, retain and motivate its key employees. Companies are, however, under pressure to control the cash cost that this involves; facing the challenge of balancing overheads whilst motivating key personnel.

We advise businesses on designing their employee incentive strategy to minimise cost whilst maximising employee engagement and tax efficiency. We advise executives and employees on the commercial and taxation implications of participating in incentives.

We have been very pleased with the work that Wright Hassall has carried out for us. We have always found the team very responsive to our needs – producing work to a high standard to the required timescales, and answering queries often at short notice.

Why introduce an incentive scheme?

Companies implement share schemes for a number of different reasons and the motivations behind each arrangement will vary depending upon the nature of the business, shareholder goals and the employees in question.

Common reasons for implementing share schemes include:

Recruiting new staff – with shares or share options often enabling businesses to recruit new joiners with the promise of sharing in the growth of the company. For growth companies in particular, share schemes can give them an edge against more established businesses where shares may either not be on offer or the potential upside is far less.

Retaining key staff – as the “battle for talent” remains, having an existing share interest can help ward off potential suitors for key employees. Properly designed employee options or shares will be linked to an employee’s continued service with value being forfeited if the employee decides to leave the company. Many of our clients look to reward length of service with share awards vesting over time in ‘line’ with continued service.

Motivating existing employees – carefully designed share schemes will reward employees for achieving key business goals, whether that is achieving an exit or intermediate personal or corporate targets. Many of our clients design their incentive plans to link reward to performance with increased returns to employees as performance improves.

Aligning employee and owner interests – shares or share options can help employees to start to think and operate as business owners by having a genuine a stake in the capital value of the business.

Psychological benefits – offering shares can have a powerful impact on employee behaviour and can provide much more of a tie-in to the business than salary and annual bonuses.

Performance improvement – academic research supports the view that businesses with employee ownership or where employee have a potential future stake perform better than those do not offer share participation.

Tax breaks – successive UK governments have recognised the value to the economy of employee ownership and offer generous tax savings to both companies and employees alike. Gains on shares can be delivered at tax rates of between 0%-20% whereas equivalent cash bonuses can be taxed at as high as 47% in employees’ hands and with 13.8% employer’s National Insurance. The financial benefits of a gain from shares can therefore be significantly greater than through cash.

Succession planning – share schemes can act as a means of bringing new talent through to an ownership and management roles and transition a change of ownership from old to new management. The upside of employee shares can also be used to assist management buy-outs.

How incentives can help

Well-designed employee incentive plans can help deliver significant benefits to a business through:

Helping to recruit new staff;

Aiding with the retention of key employees;

Aligning the interests of shareholders and employees through motivating employees to work towards desired business goals;

Articulating how value is created for a business and rewarding employees for that value creation; and

Providing rewards to employees in a tax and cost efficient manner for the employees, business owners and the company itself.

Working with us

How we can help

We are able to help with all aspects of employee incentives and employee share schemes, including:

selecting the right type of arrangement for your business/employees;

designing the detailed key terms;

drafting all related paperwork;

liaising with share valuers;

communicating the arrangements to employees; and

managing with the ultimate vesting/pay outs under incentives.

We advise on a wide variety of incentive arrangements across a diverse range of sectors, ranging from one key employee in a start-up right through to all-employee plans involving thousands of employee participants.

When we can help

We can help at all stages of the lifecycle of employee incentive arrangements, including:

Implementation

Liaising with HM Revenue & Customs and other advisers, including share valuers;

Communicating the arrangements to key stakeholders – including employees and shareholders; and

Managing the process through to completion.

HMRC reporting

Reporting the grant of Enterprise Management Incentive options to HMRC;

Registering tax favoured plans with HMRC; and

Reporting employee incentive activity to HMRC following the end of each tax year.

Maturities/other post-award events

Managing maturities under existing incentives, including:

Reviewing the extent of vesting;

Reviewing the taxation implications and advising on relevant compliance obligations; and

Reviewing the impact on existing incentives of (amongst other things):

Changes in business activities;

Changes in share capital structure; and

Departing employees.

Corporate transactions

Advising on the impact of transactions on existing incentive plans;

Identifying tax and cost saving efficiencies;

Identifying and managing tax costs and compliance obligations; and

Managing retention risks, including the transition between pre and post deal incentive arrangements.

Why choose us?

When choosing a service provider you want to be sure that all the required deliverables will be provided and ideally that you will also receive added value. Choosing a legal product, such as an employee share scheme, is no different.

By choosing our employee incentives team, you will receive the following benefits:

Expertise

Our team has a combined 23 years’ experience working exclusively on employee incentive matters. We specialise in incentives rather than it being one of a number of practice areas that we cover;

Combined tax and legal knowledge

Our two senior share schemes lawyers both have “Big Four” accountancy experience. Combined with working for large national law firms we are able to offer both legal and tax expertise to ensure that implementation and operation of the arrangements are effective and that tax efficiencies are secured;

Risk management

Selecting an adviser to implement your incentive plan can be difficult. In particular, differentiation between potential providers in terms of quality at the time of selecting your adviser may not always be clear with tax and/or commercial issues only arising post-implementation. Our team’s expertise and experience help us to ensure that all commercial, legal and tax risks are managed and removed;

Experience

Our specialist knowledge means that we can consider all of the “what ifs” for you. During years of advising clients, we have encountered pretty much all the challenges businesses face in implementing an incentive plan;

Innovation

We pride ourselves on being able to provide innovative solutions to the design and implementation issues faced by businesses. We are often enlisted by other advisers to provide bespoke solutions to their clients’ incentive issues;

Efficiency

Most of our client contacts have a number competing priorities along with managing or implementing their incentive plans. We understand the importance of protecting your management time. We will drive the process for you. We regularly project manage the implementation of plans for our clients, including liaising with relevant stakeholders and other advisers to ensure timely and efficient delivery processes;

Genuine interest in your objectives

Properly designed employee incentives require an understanding of business and shareholder goals. We enjoy getting to know our clients’ businesses, shareholders’ personal objectives and the drivers behind the incentives and tailor our advice and solutions accordingly.

Cost

We understand that cost is a central consideration in choosing a legal services provider. Our expertise and lower charge out rates, when compared to our larger peer group competitors, enable us to deliver our services at competitive rates and offer great value for money. We offer a clear pricing structure; usually on the basis of fixed fees so there are no hidden surprises.

Working with intermediaries

Accountants and tax advisers

We currently work with a number of local and national accountancy/tax firms providing specialist support to them and their clients in relation to employee incentive matters.

We can offer assistance in the following areas:

design support covering all relevant commercial terms of an incentive arrangement;

On 5 July 2017, the Supreme Court handed down its judgement in the case of RFC 2012 Plc (in liquidation) (formerly The Rangers Football Club Plc) v Advocate General for Scotland often referred to as ‘the Rangers big tax case’.

Small and medium sized manufacturing businesses may sometimes find themselves at risk of losing key employees to larger companies offering bigger pay packets. However, there are certain share based incentive schemes which may help solve this problem.